Structured Problem Solving for Supply Management Effectiveness

83rd Annual International Conference Proceedings - 1998

Abstract. The paper highlights the utility of structured problem solving methods for purchasing and supply management. Given the plethora of assorted problems and situations with purchasers are confronted in the global marketplace, substantive ways of generating alternative solutions must be identified and implemented. Thus, it is critical for professional purchasers to build and hone problem-solving skills.

Introduction. As never before in the history of the supply management profession, decision-making accuracy and adequacy have become the hallmarks of effectiveness. Supply managers possess varying levels of astuteness and analytical sophistication. For these professionals to excel in complex, global environments, decision-making skills must be honed and refined. The current paper highlights the usefulness of structured problem solving (SPS) skills in assisting supply managers in making decisions in a wide range of areas at both the strategic and operational levels. Examples of applications of SPS to aspects of the supply management process are used as a framework to develop the thesis of the paper.

What Is Structured Problem Solving? Structured problem solving (SPS) is a series of interconnected processes aimed at generating the appropriate problem solution under varying degrees of uncertainty. Supply management situations, along with others, follow the approach detailed below in solving problems:

The intelligence phase involves problem recognition and information gathering; the design phase identifies alterative routes to solving the problems; and in the choice phase, solutions are chosen and corresponding implementation strategies are presented.

The various phases of structured problem solving also involve some degree of

convergence and divergence. Convergence refers to narrowing of information to some smaller, more manageable dimension or unit. On the opposite side is divergence, where information is spread out or disseminated widely.

Problem analysis demands grasping wide arrays of information sectors, analyzing those sectors, and narrowing them down to the relevant supply management issue. When identifying alternative solutions, divergence is required because supply managers want to consider the widest possible array of options to remedy the situation. Both approaches are essential in decision making and require extra skill and effort in development.

* Increased reliance on suppliers for both product and process technology;

* More creative partnerships / alliances;

* More global sourcing;

* Increased outsourcing; and

* Continued growth and emphasis on information systems.

Some of the above challenges are presented in the supply management scenarios to follow. Specific approaches to problem-solving are identified and applied.

Scenario One. A small and successful plastics firm is interested in a carving out a new strategic direction. In the past, purchasing as played an integral role in making the company successful. In fact, the purchasing function has been singled out for recognition as a key success factor for the organization. At this juncture purchasing is seeking new and different ways to continue contributing to the firm's record achievement. How can this be accomplished?

To respond to the challenge of identifying means for purchasing to participate actively in the new corporate strategy, it is important to refer again to the phases of SPS: intelligence, design, and choice. The intelligence phase involves collecting information, internally and externally, that allows the decision maker to form a frame of reference concerning the basic issue. Digesting information from multiple sources encourages the consideration of numerous options that otherwise would have gone unnoticed. As part of the intelligence or information-gathering stage, an approach known as WHY-WHY METHOD. This method is used to determine the underlying causes of the problem. A series of "WHYS" are asked to uncover the core problems or issues.

In the current scenario, a starting point could be "why did purchasing seem to be a major success factor in the company." The response might be that purchasing received considerable autonomy to make decisions and to take risks. Another round of why' follows and the process continues. After several iterations, the decision maker converges to a point where options are narrowed. The results of this part of the intelligence gathering phase is then followed by the design phase of SPS.

At this point alternative solutions are delineated and generated. One helpful approach to use here for this scenario is that of HOW-HOW METHOD. The focus of this approach to SPS is on steps followed in implementing a solution. It provides a number of alternative solutions by going through several iterations of asking "how?" In particular, how can purchasing make new and substantive contributions to the plastics firm's strategic initiatives. This portion of SPS encourages divergent processes, whereby a very wide range of alternative solutions are considered. The greater the number of alternatives from which to choose, the greater the probability that new and more substantive choices will be made. Different ways of making strategic contributions at the plastics firm can surface if various SPS methods are employed.

In the choice phase of SPS for scenario one, the decision maker returns to convergent thinking in order to reduce the number of solutions developed in the design phase. The narrowing of options is in part a function of the evaluative criteria used, e.g. time, costs, technical know-how, organizational risk-taking tendencies, etc. Depending on the nature of the decision, a small or large number of criteria may be employed to reach the best solution.

Scenario Two. A major firm in the telecommunications industry is considering switching to commodity teams as a form of organizing its purchasing efforts. These multidimensional teams have considerable potential for improving purchasing effectiveness. The decision makers have been told that going to commodity teams allows for more cost control, additional national contracts, and increased negotiating power. How can this firm realize the potential of this form of purchasing organization?

One SPS technique useful here is FORCE FIELD ANALYSIS. This method helps identify forces contributing to or hindering a solution to the problem. The decision maker starts by describing both the worst- and optimal-case scenarios, while the middle point is the current position. In this situation, the worst case would be that commodity teams are a disaster and the best case would be that these teams enhance effectiveness enormously. Identify forces strengthening the positives and weakening the negatives. The basic thrust of this SPS technique is to encourage a more substantive approach to weighing negatives and positives in decision making. It is useful when new supply management choices are being made or when adaptations in current resources and efforts are required.

Scenario Three. A major research/teaching hospital is considering outsourcing the following areas: maintenance, food services, travel, human resources, and the legal staff. They have retained the services of a key outsourcing consulting firm. Purchasing professionals on staff are working with consultants to formulate a comprehensive plan for outsourcing the above services. How should they approach this process of evaluating outsourcing options?

One SPS technique appropriate for this scenario is that of REVERSE BRAINSTORMING. Here criticisms of each option are generated. Decision makers expend extra effort to find every possible fault with an alternative solution or course of action. The fundamental question to be answered here is: How can this option fail? It forces a thorough assessment of failure. It helps temper the optimism some decision makers have for particular alternatives. Another part of reverse brainstorming encourages decision makers to identify means to overcome the obstacles identified. When this occurs, a more holistic perspective on all of the pertinent issues and variables is evident. Better decisions are made with fewer mistakes or obvious errors.

Factors Influencing the Use of Structured Problem Solving in Purchasing. SPS methods hold considerable potential for assisting decision makers grapple with the complexities of today's dynamic organizations. However, there are variables that may constrain the use of SPS in many firms. Among the limiting factors are individual variables, organizational pressures, and external concerns (Couger, 1995).

Individual limiting factors include the decision making styles of purchasers, personality, risk tolerance, perceived costs of inaccurate choices, degree of tradition-boundness, and learning orientation. Organizational forces include organizational culture, leadership approaches, role of purchasing in the organization, degree of interfunctional orientation, decision making autonomy allowed, and the relative innovativeness of the firm. External concerns include the nature of competition, position of the firm in the industry, global orientation, the organization's manner of handling external pressures, and relationships with both suppliers and customers.

Any decision maker in supply management is influenced by a collage of the above variables. Thus, it is significant to overcome the limiting nature of these variables and work to maximize both convergent and divergent thinking in decision making.

What Can Structured Problem Solving Really Contribute to Supply Management?

The most conspicuous benefits of SPS are (Van Gundy, 1988):

*Increase the number of alternative solutions - as supply management decision-making becomes more intricate and intense, it is essential to have the opportunity to pull from a broader reservoir of ideas and approaches. If decisions are more complex than before and purchasers continue to pursue familiar solution paths, naturally the quality and caliber of decision making will suffer. Active involvement in increasing the pool of options is an integral part of today's global strategic sourcing.

*Increase the competitive advantages - as the competitive intensity of organizations in general and supply management in particular increases, it is even more imperative that SPS methods be applied in a systematic and methodical manner to assist in re-positioning firms upward in the competitive arena. Specifically, areas like value analysis, purchasing performance measurement, customer satisfaction, quality assurance are well-suited to aid organizations in becoming more competitively viable. If new and different approaches to decision making are produced, it follows that some positive spinoffs are likely to ensue, which should lead to improved supply management performance.

*More efficient and effective use of resources - given the finite nature of productive resources, decision makers are in constant pursuit of alternative means of deploying these resources. SPS allows for various reconfigurations of resources to match changing goals, situations, and environments. Human resources in purchasing can be used more efficiently by relying on SPS methods to enhance the quality of decision making. SPS can support efforts to focus attention on alternative approaches to transforming and utilizing supply management resources required to propel the organization in the direction of world-class.

Summary. As supply managers confront an ever-growing array of challenges, decision-making becomes much more burdensome. One means to alleviate some of the burden and simultaneously enhance the probability of making better decisions is to rely on the methodology of structured problem solving for support and guidance. These techniques are not to supplant what managers are doing currently, but to broaden the landscape of decision choices available to purchasing professionals. SPS techniques are applicable in operational and strategic decisions. As a proven process, SPS holds considerable potential for purchasers in all types of organizations. The fundamental challenge at this juncture is to encourage the use of these approaches by supply management decision makers that might be otherwise content with traditional methods.